Dec 10, 2009

Mega Laser Shoots Itself in the Foot

How much the National Ignition Facility (NIF) at the Lawrence Livermore National Laboratory (LLNL)
actually costs has always been a bit of a mystery. (We do know that
its costs estimate was $700 million when the Department of Energy (DOE)
sold the project to Congress in the early 1990s, yet we heard recently
that its cost estimate is in the $5-6 billion range). Today, there may
just be some proof that LLNL has been shuffling accounting books to
intentionally mislead DOE and the public about the true costs of the
mega laser.

Tri-Valley
CAREs has released
a press
release and a DOE financial review that found that Livermore Lab's practice
of assigning NIF overhead expenses to other Lab programs is “non-compliant” with
Public Law 100-679 Cost Accounting Standards, a key part of the structure
set up to regulate government contracts. The DOE reviewers found that
these accounting techniques give “extraordinary
special treatment
to NIF” and are “inequitable”
to other lab programs.

We hate to say "we told you so,"
but we
warned DOE Secretary
Steven Chu that NIF
was not a good example
of “Project Management Excellence.” DOE has it turned around: they
made an award before receiving the results of a financial review.

The following was a a Message to Laboratory Employees From The LLNL Director on 12/10/09.
======
Several local newspapers carried a story this morning with the headline: Laboratory Hides the Cost of the Colossal NIF Laser. The claim in the story is that the overhead charges for the NIF project and the National Ignition Campaign have been inappropriately low.

This is incorrect. I'd like to tell you the facts.

As is the common practice for many Department of Energy construction projects, NIF uses a construction overhead charge that ensures that the project pays for the Laboratory-wide services that it uses and requires. There are two reasons for this:

-- It is important to ensure that the overall finances of the host institution are not distorted as the project initially grows and then declines. This ensures that the true cost of the project is properly reported. This is why the NIF and the NIC pay directly for services that are otherwise paid for indirectly on other Laboratory programs.

-- The use of "construction rates" was explicitly approved by the Department of Energy, with concurrence in writing by the Chief Financial Officer of the Department. The existing and approved rate structure forms the basis for the DOE budget for the completion of the National Ignition Campaign.

Each year, the Laboratory discloses to the Department of Energy its overhead structure and charges. This "disclosure statement" includes the nature and the basis for the construction rates, and is annually approved by the Department. LLNL accounting practices for NIF have been consistently reviewed and approved by DOE and applied by the Laboratory since the inception of the project. Additionally, we have had numerous external groups review our practices, and they have concurred that our approach is fully compliant with DOE rules and regulations, with our disclosed and approved practices, and with accepted interpretations of the Cost Accounting Standards. A recent DOE-sponsored audit came to a conclusion consistent with this approach -- that NIF must be treated as a "construction work-in-progress"activity through completion of the National Ignition Campaign in late 2012.

As you may have read, an accounting review by the NNSA Service Center in Albuquerque, NM, reached a different conclusion -- a conclusion that is not consistent with more than 10 years of prior DOE approvals and practices.

The Laboratory stands by the DOE-approved accounting practices that have been used throughout the construction and commissioning of the NIF and the NIC program.

Progress in using NIF has been spectacular. We are looking forward to achieving fusion in the laboratory. It will truly be a game changer.